Rains cause delays on supply flow of Indonesian cassia
RAINS in Indonesia have led to shortages of cassia for export as there are delays in getting material dried, and this has sparked slight gains in prices at local level.
Dealers said this was likely to be a short-term blip only and as soon as dry weather returned availability would soon return to normal.
Patrick Barthelemy, founding member of Cassia Co-op, said: “The little bit of stock that was in the hands of local collectors has been bought out by the big exporters. That created a bit of a shortage because all those collectors have to go back in the field and buy product and that is not so easy because of the rain.”
Mr Barthelemy explained that raw material prices had gained by about Rp1,000 (10¢) a kg as a result. “This will probably take a couple of months to be reflected in Europe,” he added. One of the reasons for this delay in higher prices being passed on to European consumers is that old stocks will first have to be used up, he noted.
In terms of export quotes, prices of certain grades would average up to $150 a tonne higher than previously, Mr Barthelemy suggested.
However, he cautioned that there was no underlying shortage as there was a favourable level of natural re-growth of trees that had previously been cut to obtain cassia. Hence, the price increases should be short lived.
One Rotterdam trader said he had also seen reports of rain-induced blips on availability and he confirmed that this was leading to a “slightly firmer tendency” on prices, including on some grades at export level.
Mr Barthelemy recalled that whenever rains hampered drying operations in Indonesia there was talk of shortages and suggestion that prices would increase and stay higher. “All of a sudden the exporters come in and say ‘we have a shortage and now the market is finally moving up’. They just don’t look at the real reason for the shortage, and it is wishful thinking,” he remarked.
Mr Barthelemy observed that US demand had eased of late after an upsurge in the first half of January.
Buyers from Medan, a city north of Sumatra, had been very active. This was being favoured by exporters over the long-established Padang as it has a much larger capacity harbour and better availability of containers and vessels and hence more ocean traffic.
Shipments from Medan were being made to Europe, the Middle East, Turkey and Spain, Mr Barthelemy noted.
The Rotterdam trader said he was seeing regular demand only and the peak offtake was usually over the August to October period.